Legislative Analyst's Office, January 1998

Gambling in California:
An Overview


Gambling in the United States is a multibillion dollar industry and is rapidly expanding. Consumer spending on gambling activities nationwide has outpaced the growth in personal income over the past 14 years. Additionally, consumers have made a dramatic shift in the types of gambling activities they are participating in, with wagering on charitable games and horse races declining significantly. In this report, we outline the nationwide gambling industry, and discuss in more detail what is occurring in the California gambling industry. The California gambling industry includes the state lottery, card rooms, horse race wagering, charitable gambling, and gambling on Indian lands. With regard to gambling on Indian lands, we recommend the Legislature clarify the state's role in this area.

Table of Contents

  • What Kind of Gambling Is Allowed?
  • Size of the Gambling Industry
  • Indian Gambling


  • Lottery
  • Card Rooms
  • Horse Racing
  • Charitable Gambling
  • Indian Gambling

Gambling in the United States

What Kind of Gambling Is Allowed?

Gambling in the U.S. takes many forms, casino- style gambling, lotteries, parimutuel wagering on horse and dog races, card games, bingo, and charitable fund-raising.

As Figure 1shows, the types of gambling authorized by each state vary significantly. Forty-eight states allow some form of gambling, with only Hawaii and Utah prohibiting all forms. Most states have lotteries, horse racing, and charitable gambling (usually bingo). Gambling on Indian land (commonly referred to as "Indian gambling") is also present in a majority of states and is rapidly increasing.

When many people think of gambling, they think of casino-style gambling. In 1931, Nevada became the first state to authorize such gambling. It took almost a half-century before another state followed suit, when in 1977 New Jersey authorized casino-style gambling in Atlantic City. Since then, however, 12 other states have authorized it. (If one counts casinos operated on Indian lands, there are a total of 27 states with this type of gambling.)

Size of the Gambling Industry

Gambling in the U.S. is a multibillion dollar industry. The common monetary measures used
in the gambling industry are handle and gross revenue.

Unless otherwise noted, gross revenue is the monetary measure used throughout this report.

As shown in Figure 2 (see page 4), the estimated revenue for the gambling industry nationwide in 1996 was $47.7 billion. Casino gambling (not including Indian casinos) received the largest share of revenue, with a total of $17.5 billion, or nearly 37 percent, of the nationwide total. Lotteries grossed the next largest share of gambling revenue totaling $16.2 billion, or 34 percent, of the total.

For comparison purposes, Figure 2 shows estimated gambling revenues for 1982. Total revenue in that year was $10.5 billion, meaning that in 14 years, revenues have grown over 350 percent. During that same time period, U. S. personal income increased 142 percent. In other words, consumers have increased considerably the portion of their income spent on gambling.

Figure 2 also shows that consumers have shifted their spending among the different gambling industry segments. Indian gambling, which basically did not exist in 1982, has grown to 11 percent of all gambling revenues. Lotteries' share of industry revenues grew by a similar amount. Offsetting these increases were significant declines in the shares of horse racing and charitable gambling.

Figure 2        
Gross Gambling Revenues by Industry Segment
United States 1982 and 1996
(In Billions)
  1982 1996
  Amount Percent of Total Amount Percent of Total
Casinos $4.2 40.0% $17.5 36.7%
Lotteries 2.2 21.0 16.2 34.0
Horse Racing 2.2 21.0 3.2 6.7
Charitable 1.2 13.0 2.4 5.0
Card Rooms 0.1 1.0 0.7 1.5
Other 0.6 6.0 2.3 4.8
Indian -- -- 5.4 11.3
Totals $10.5 100.0% $47.7 100.0%

Indian Gambling

Indian gambling has experienced dramatic growth in recent years. Revenues have grown from an estimated $120 million in 1991 to $5.4 billion in 1996--a 114 percent annual growth rate.

Prior to 1988, there was much uncertainty as to what gambling could occur on Indian lands and under what conditions. In 1988, Congress attempted to resolve many of these issues by passing the Indian Gaming Regulatory Act (IGRA). The IGRA separates gambling activities into three distinct classes or categories, and provides different restrictions on Indian tribes desiring to conduct such activities. Figure 3 summarizes the act's regulatory categories.

The figure shows that, generally speaking, Indian tribes may offer:

If the state allows Class III gambling and an Indian tribe asks to negotiate a compact for operation of those gambling activities on tribal land, then the state is required to negotiate in good faith for a compact. There has been much debate and differing court opinions regarding whether there can be a tribal-state compact in a state that does not allow Class III gambling. One interpretation of the IGRA is that if a state does not allow Class III gambling, then it cannot offer Class III gambling to Indian tribes. However, another interpretation is that a state may offer Class III gambling to Indian tribes even if it is not allowed elsewhere in the state. Through mid-June 1997, a total of 145 Indian tribes in 24 states had entered into 161 compacts for Class III gambling.

Gambling in California

In California, the State Constitution has provisions covering most types of gambling. Specifically, it:

The Constitution does not specifically mention card rooms. The Legislature, however, has authorized card rooms, allowing games (such as poker) where the card room operator has no stake in the outcome of the game.

In 1996, estimated gross gambling revenues for the California gambling industry totaled $2.3 billion. (This does not include Indian gambling, for which we do not have revenue estimates. The "best guess" is that Indian gambling in the state generates revenues easily in the hundreds of millions of dollars and potentially exceeding a billion dollars a year.) This
revenue represents 5.7 percent of the comparable nationwide total. As shown in Figure 4, the state lottery accounts for nearly 50 percent of the statewide gambling revenues.


The California State Lottery (CSL) was created by voter approval of Proposition 37 (the California State Lottery Act of 1984). The lottery is operated and administered by a five-member commission appointed by the Governor. The Legislature has the authority to amend the Lottery Act if, by doing so, it furthers the purposes of the measure.

The act specifies that the proceeds of lottery ticket sales shall be distributed as follows:

As shown in Figure 5, lottery ticket sales declined in the second year of operation, grew to a peak of $2.6 billion in 1989, declined again until 1992, and have steadily increased since that time. Lottery sales in fiscal year 1995-96 totaled $2.3 billion.

The majority of these sales was from two types of games the Super Lotto game (almost one-half of sales) and Scratcher tickets (one-fourth of sales). Figure 6 summarizes the games currently offered by the CSL.

Figure 6
California State Lottery Games
As of December 1997
Super Lotto

Players choose a set of six numbers (from 1 to 51) per play. A winning ticket is one that matches any three, four, five, or all six numbers of the six numbers drawn. Winning numbers are drawn every Wednesday and Saturday.


Scratchers are tickets with a "scratch off" portion on each ticket. Players can learn instantly how they fared, and cash in smaller winnings on the spot. The lottery offers a variety of different Scratchers and is constantly changing them. The play styles, prize amounts, and ticket cost vary. (Currently, Scratchers cost $1, $2, or $3 each.)

Fantasy 5

Players pick a set of five numbers from 1 to 39. Winning tickets are those that match any two, three, four, or all five of the five numbers drawn. Draws occur every day.

Daily 3

Players pick a set of three numbers from 0 to 9. Players can try to match the three numbers drawn in the exact order or in various combinations. The draw occurs every day.

Hot Spot

Players pick the spot (set of numbers) they want to play from 1 to 80. They can play two, three, four, five, or eight spots. If players choose to play a "three spot," then they pick a set of three numbers. Draw takes place daily from 6:05 a.m. to 1 a.m., every five minutes. Players can learn quickly how they fared.

Big Spin Television Show

Potential players can "win" a ticket to be a player by playing a "Big Spin" Scratcher ticket. If three SPIN symbols on the ticket match, then the player gets a ticket to the show and wins either $1,500 or a chance to spin the wheel at the show. Prizes from spinning the wheel vary from $20,000 to $2 million. Fantasy 5 players can also play to win on the Big Spin show.

Card Rooms

The state allows card rooms to conduct certain "nonbanked," "nonpercentage" card games. These are games where the card room operator has no stake in the outcome of the game. The players play against each other and pay the card room a fee for use of the facilities. Typical card games include draw poker, 7-card stud, and Asian games, such as pai gow. State law specifically prohibits certain games such as twenty-one (blackjack), monte, and faro.

There are currently 176 active card rooms operating a total of 1,883 tables in California (excluding rooms operated on Indian land). As shown in Figures 7 and 8, these card rooms are located throughout California.

Figure 7
Location and Size of California Card Rooms by County
(As of October 1997)
  Number of  
County Card Rooms Tables Range of Number of Tables Per Card Room
Alameda 5 59 2-40
Butte 4 12 3
Colusa 1 4 4
Contra Costa 12 145 1-100
Fresno 4 33 1-25
Humboldt 3 9 2-4
Imperial 3 9 3
Kern 10 50 1-15
Kings 3 7 2-3
Lake 1 3 3
Lassen 1 2 2
Los Angeles 6 914 44-300
Madera 1 2 2
Marin 1 4 4
Merced 5 10 1-3
Mono 1 3 3
Monterey 11 38 2-7
Napa 2 17 5-12
Nevada 2 6 3
Placer 2 3 1-2
Riverside 3 44 2-39
Sacramento 16 86 3-10
San Benito 1 2 2
San Bernardino 1 25 25
San Diego 9 64 1-25
San Joaquin 7 30 3-8
San Luis Obispo 7 16 2-3
San Mateo 3 48 3-35
Santa Clara 6 98 1-40
Santa Cruz 8 16 1-3
Santa Barbara 1 4 4
Shasta 2 20 4-16
Sierra 1 1 1
Solano 2 5 2-3
Sonoma 4 21 1-12
Stanislaus 5 22 3-6
Tulare 13 24 1-3
Tuolumne 1 2 2
Ventura 4 14 2-6
Yolo 1 2 2
Yuba 3 9 1-4
Totals 176 1,883  

Most card rooms are very small--less than five tables. There are, however, six very large card rooms, which operate one-half of the tables in the state. These clubs are: California Commerce Club (300 tables), Bicycle Club (200 tables), Hollywood Park Casino (140 tables), Normandie Club (120 tables), and Crystal Park Casino (110 tables) all in Los Angeles County and Ladbroke's Casino-San Pablo (100 tables) in Contra Costa County.

Estimated 1996 revenue for the 176 California card rooms totaled $630 million. This is nearly 12 percent less than prior-year estimated revenues of $712 million.

State Regulation. State regulation of card rooms is currently in a period of transition. The Legislature recently enacted The Gambling Control Act Chapter 867, Statutes of 1997 (SB 8, Lockyer) that established an overall umbrella of state regulation of card rooms beginning January 1 of this year. (Prior to January 1, the Attorney General's Office registered card rooms, but had only minor regulatory authority.)

Under Chapter 867, the state will regulate card rooms through a three-member Gambling Control Board (for up to one year) and a new Division of Gambling Control in the Attorney General's Office. A five-member Gambling Control Commission will succeed the board on either January 1, 1999 or upon enactment of a statute appropriating funds for the division and the commission, whichever occurs first. The 1998-99 Governor's Budget includes about $5 million to carry out the provisions of Chapter 867.

The responsibilities and authorities of the division and the board/commission (hereafter referred to as the commission) include licensing of owners and most employees, investigating suspected violations of the Gambling Control Act, granting approval of games, and assessing fines for violations of the act. Thus, the state regulatory authority over card rooms has significantly increased with the implementation of Chapter 867.

Chapter 867 does not change local governments' basic responsibilities concerning card rooms. They will continue to approve card rooms in their jurisdiction, as well as establish the hours of operation, table size and number, and wagering limits.

Horse Racing

The California Constitution authorizes the Legislature to provide for the regulation of, and wagering on, horse racing. Regulation of horse racing is the responsibility of the California Horse Racing Board, which was established by the Legislature in 1933. The board consists of seven members appointed by the Governor.

As shown in Figure 9, there are currently 6 privately owned race tracks, 9 racing fairs, and 18 simulcast-only facilities operating in California. These latter facilities do not have live racing; instead they allow betting on televised races occurring elsewhere in the world. (All the race tracks and fairs also have simulcast facilities.)

Four of the 18 simulcast-only facilities are located on Indian land. Chapter 867 repeals the prior statutory provision authorizing the board to negotiate with tribes for parimutuel horse race wagering compacts. Any new compacts for parimutuel horse race wagering would be subject to the same process that is required for all other Class III gambling activities on Indian lands.

In 1996, the California horse racing industry grossed $461.3 million from wagers placed on races. This is a 6 percent decline from prior-year revenues. The horse racing industry in California and nationwide is experiencing a steady decline in percent share of total gambling revenues as well as a shift in player betting from on-track to off-track sites.

Current California law provides for the licensing of the various racing associations by type of racing offered. As shown in Figure 10, the privately owned race tracks offering thoroughbred racing represent the largest share of the industry in California. It should be noted that the different race meets for a single track represent different licenses issued by the Horse Racing Board to racing associations that then lease the track for the duration of the meet. For example, the harness race meets held at Cal Expo in Sacramento are operated by a private entity, while the California State Fair, also held at Cal Expo, is a state agency.

Figure 10
1996 California Horse Race Meetings
and Total Parimutuel Handle
(Dollars in Millions)
Track City (County) Meet Dates Handlea
Thoroughbred Race Meetings
Santa Anita Park Arcadia (Los Angeles) 12/26/95-04/22/96




Hollywood Park Inglewood (Los Angeles) 04/26/96-07/22/96




Del Mar Del Mar (San Diego) 07/24/96-09/11/96 425.7
Golden Gate Fields Albany (Contra Costa) 03/27/96-12/22/96 323.3
Bay Meadows San Mateo (San Mateo) 01/24/96-11/04/96




Quarter Horse Race Meetings
Los Alamitos Cypress (Los Angeles) 04/19/96-12/22/96 $169.1
Harness Race Meetings
Los Alamitos Cypress (Los Angeles) 12/22/95-04/07/96 $56.0
Cal Expo Sacramento (Sacramento) 04/12/96-07/21/96




Los Angeles County Fair Pomona (Los Angeles) 09/12/96-09/30/96 $92.9
Sonoma County Fair Santa Rosa (Sonoma) 07/24/96-08/05/96 30.9
Alameda County Fair Pleasanton (Alameda) 06/26/96-07/07/96 29.9
San Mateo County Fair Bay Meadows Track (San Mateo) 08/07/96-08/19/96 28.4
Solano County Fair Vallejo (Solano) 07/10/96-07/22/96 25.4
California State Fair Sacramento (Sacramento) 08/21/96-09/02/96 17.8
San Joaquin County Fair Stockton (San Joaquin) 06/12/96-06/23/96 12.5
Fresno District Fair Fresno (Fresno) 10/02/96-10/13/96 6.7
Humboldt County Fair Ferndale (Humboldt) 08/08/96-08/18/96 1.6
  aHandle as defined on page 2.

The state receives revenue from horse racing activities through facility license fees (based on a percent of parimutuel handle), breakage (from rounding down to the nearest 10 cents on winning tickets), unclaimed parimutuel tickets, and occupational (jockeys, trainers, et cetera) license fees and fines. State revenue from these sources totaled $108 million ($69.6 million to the General Fund) in fiscal year 1995-96, a 6.6 percent decline from the previous year.

Existing law allows owners of a licensed horse racing facility to operate one card room located on the racetrack premises. Only one horse racing facility Hollywood Park, located in Inglewood operates a card room. As noted above, this card room operates 140 tables and is the third largest card room (excluding card rooms on Indian land) in the state.

Charitable Gambling

Charitable gambling serves as a fund-raiser for nonprofit organizations. In California, bingo is the only legal gambling activity for charity fund-raising.

Organizations operating bingo games must do so in accordance with local ordinances. In general, these ordinances specify limitations on days, locations, and hours of operations of bingo games. Also, local governments may charge a license fee for operating bingo games.

Charitable bingo operations in California had estimated gross revenues totaling $55.5 million in 1996. Similar to card rooms, charitable bingo revenues are not publicly reported or audited. Consequently, the estimated revenues are not verifiable.

Indian Gambling

According to the federal Bureau of Indian Affairs, there are over 100 Indian rancherias/reservations in California encompassing over 400,000 acres. These Indian lands are located throughout the state in 38 different counties. Currently, there are 41 Indian gambling operations in California, located on rancherias/reservations throughout the state (see Figure 11). The specific facilities and the operating tribes are shown in Figure 12.

Figure 12
Indian Gambling Operations in California
As of July 1997
County Facility Name City Owner/Operator
Amador Jackson Indian Bingo and Casino Jackson Jackson Rancheria Band of Miwuk Indians
Butte Feather Falls Casino Oroville Mooretown Rancheria
  Gold Country Casino Oroville Tyme Maidu Tribe of the Berry Creek Rancheria
Colusa Colusa Indian Bingo Colusa Colusa Band of Wintun Indians
Del Norte Golden Bear Casino Klammath Coast Indian Community of the Resighini Rancheria
  Elk Valley Casino Crescent City Elk Valley Rancheria
  Lucky 7 Casino Smith River Smith River Rancheria
Fresno Mono Wind Casino Auberry Auberry Big Sandy Rancheria
  Table Mountain Rancheria Casino and Bingo Friant Table Mountain Rancheria
Humboldt Hoopa Lucky Bear Casino and Bingo Hoopa Valley Tribe
  Cher-Ae Heights Bingo and Casino Trinidad Trinidad Rancheria
Imperial Paradise Casino Winterhaven Quechan Indian Tribe
Inyo Sierra Spring Casino Big Pine Big Pine Paiute Tribe of the Owens Valley
  Konocti Vista Casino and Bingo Finley Big Valley Rancheria of Pomo Indians
  Paiute Palace Casino -- Bishop Paiute Tribe
Kings The Palace Indian Gaming Center Lemoore Santa Rosa Band of Tachi Indians of the Santa Rosa Rancheria
Lake Twin Pines Casino Middletown Lake Miwok Indian Nation of the Middletown Rancheria
  Robinson Rancheria Bingo and Casino Nice Robinson Rancheria of Pomo Indians
Lassen Northern Lights Casino Susanville Susanville Indian Rancheria
Mendocino Red Fox Casino and Bingo Laytonville Cahto Tribe of the Laytonville Rancheria
  Shodaki Coyote Valley Casino -- Coyote Valley Band of Pomo Indians
  Hopland Sho-ka-wah Casino Hopland Hopland Band of Pomo Indians
  Black Hart Casino -- Sherwood Valley Rancheria
Riverside Spa Hotel and Casino Palm Springs Agua Caliente Band of Cahuilla Indians
  Cabazon Bingo Inc., Fantasy Springs Casino Indio Cabazon Band of Mission Indians
  Cahuilla Creek Rest and Casino -- Cahuilla Band of Mission Indians
  Casino Morongo Cabazon Morongo Band of Mission Indians
  Soboba Legends Casino San Jacinto Soboba Band of Mission Indians
  Pechanga Entertainment Center Temecula Temecula Band of Luiseno Mission Indians
  Spotlight 29 Casino Coachella Twenty Nine Palms Band of Mission Indians
San Bernardino Havasu Landing Resort and Casino Havasu Chemehuevi Indian Tribe
  San Manuel Indian Bingo and Casino Highland San Manuel Band of Mission Indians
San Diego Barona Casino and Bingo Lakeside Barona Band of Mission Indians
  Sycuan Indian Bingo and Poker Casino El Cajon Sycuan Band of Mission Indians
  Viejas Casino and Turf Club Alpine Viejas Band of Mission Indians
Santa Barbara Chumash Casino Santa Ynez Santa Ynez Band of Mission Indians
Shasta Burney Casino Burney Pit River Tribe
  Win-River Casino Bingo Redding Redding Rancheria
Tulare Eagle Mountain Casino -- Tule River Tribe of the Tule River Indian Reservation
Tuolumne Chicken Ranch Bingo Jamestown Chicken Ranch Band of Me-Wuk Indians
Yolo Cache Creek Bingo and Casino Brooks Rumsey Indian Rancheria
Source: National Indian Gaming Commission.

In past years, Indian gambling in California consisted almost exclusively of bingo and card games like those played in other statewide card rooms. This is because these are the Class II gambling activities allowed in California that the Indians could operate without a compact. As mentioned above, all Class III gambling on Indian land requires a compact between the state and the Indians. To date, California has entered into compacts with five Indian tribes, allowing only parimutuel wagering on horse racing.

In recent years, however, Indians have offered other types of gambling. For instance, currently one of the most debated issues concerning Indian gambling in California is the operation of video machines in Indian casinos. According to the IGRA, electronic games are Class III games and therefore require a tribal-state compact. There are no recent statewide estimates for the number of machines currently in operation on Indian land. The Attorney General's Office, however, estimated in 1996 that there were over 12,000 video machines operating on Indian lands in California.

In addition, twenty-one (blackjack) is played in some Indian casinos (although the betting is slightly different than in traditional casinos). As noted earlier, twenty-one is specifically prohibited by state law, making it a Class III activity in California (that is, there must be a tribal-state compact).

Under federal law, all state laws regarding the licensing, regulation, or prohibition of gambling are applicable to gambling on Indian lands. However, the federal law provides federal authorities with the exclusive jurisdiction to prosecute any violations of state gambling laws on Indian lands. Thus, the State of California does not have the legal authority to enforce its gambling laws on Indian land. The regulation of Indian gambling at the federal level is the responsibility of the National Indian Gaming Commission, which has the power to assess civil penalties for violations of the IGRA. In addition, the commission can order the closure of any Indian gambling operations for violations of the IGRA.

There are currently several cases regarding various issues of Indian gambling in California pending in the federal court system. These involve the issues of: (1) off-track betting taxes collected at the wagering site and (2) the legality of slot machines.

Implications for the Legislature. At present, there is no clear process for the state to reach agreement and enter into compacts with Indian tribes for Class III gambling operations in California. Under the IGRA, the state clearly has the authority to negotiate Class III gambling. What is unclear, however, are what roles the Legislature and Governor have in these negotiations. Furthermore, given the gambling restrictions in the State Constitution and state statutes, it is not clear what types of Class III activities could be allowed under a tribal-state compact. In light of these issues coupled with the growth in gambling activities on Indian landswe recommend the Legislature clarify (1) the process and procedures for negotiating Class III gambling compacts with the Indian tribes, (2) the respective roles of both the executive and the legislative branches in that process, and (3) the specific Class III gambling activities that can be negotiated in California.

This report was prepared by Megan M. Atkinson, under the supervision of Gerald Beavers. The Legislative Analyst's Office (LAO) is a nonpartisan office which provides fiscal and policy information and advice to the Legislature.
To request publications call (916) 445-2375.
This report and others are available on the LAO's World Wide Web site at http:// www.lao.ca.gov.
The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814.

Return to LAO Home Page